Carbon Taxes

2021 ◽  
Author(s):  
Jorge H. García ◽  
Thomas Sterner
Keyword(s):  
Low Income ◽  
Social Cost ◽  
Carbon Tax ◽  
Carbon Price ◽  
Low Income Countries ◽  
Carbon Taxes ◽  
Social Cost Of Carbon ◽  
Carbon Pricing ◽  
Sectoral Differences ◽  
Carbon Taxation

Economists argue that carbon taxation (and more generally carbon pricing) is the single most powerful way to combat climate change. Since this is so controversial, we need to explain it better, and to be precise, the efficiency gains are largest when the costs of abatement are strongly heterogeneous. This is often—but not always—the case. When it is not, standards can fill much the same role. To internalize the climate externality, economic efficiency calls for a global carbon tax (or price) that is equal to the global damage or the so-called social cost of carbon. However, equity considerations as well as existing geographical and sectoral differences in the effectiveness of carbon taxation at reducing emissions, suggest earlier implementation of relatively high taxation levels in some sectors or countries—for instance, among richer economies followed by a more gradual phase-in among low-income countries. The number of national and subnational carbon pricing policies that have been implemented around the world during the first years following the Paris Agreement of 2015 is significant. By 2020, these programs covered 22% of global emissions with an average carbon price (weighted by the share of emissions covered) of USD15/tCO2 and a maximum price of USD120/tCO2. The share of emissions covered by carbon pricing as well as carbon prices themselves are expected to consistently rise throughout the decade 2021–2030 and beyond. Many experts agree that the social cost of carbon is in the range USD40–100/tCO2. Anti-climate lobbying, public opposition, and lack of understanding of the instrument are among the key challenges faced by carbon taxation. Opportunities for further expansion of carbon taxation lie in increased climate awareness, the communicative resources governments have to help citizens understand the logic behind carbon taxation, and earmarking of carbon tax revenues to address issues that are important to the public such as fairness.

The unpaid social cost of carbon

2018 ◽  
Vol 31 (2) ◽  
pp. 122-134 ◽  
Author(s):  
Martina Linnenluecke ◽  
Tom Smith ◽  
Robert E. Whaley
Keyword(s):  
Fossil Fuel ◽  
Social Cost ◽  
Carbon Tax ◽  
Emission Trading ◽  
Carbon Taxes ◽  
Social Cost Of Carbon ◽  
Content Type ◽  
Trading Scheme ◽  
Fossil Fuel Industry ◽  
Fuel Industry

Purpose This paper aims to examine the complex issue of the social cost of carbon. The authors review the existing literature and the strengths and deficiencies of existing approaches. They introduce a simple methodology that estimates the amount of “legal looting” in the fossil fuel industry as an alternative approach to calculate an unpaid social cost of carbon. The “looting amount” can be defined as society’s failure to charge fossil fuel firms for the damage that their activities cause represents an implied subsidy. Design/methodology/approach The methodology used in this paper combines decisions in the form of policymakers setting carbon taxes and rational investors investing in carbon emission markets. Findings The authors show that the unpaid social cost of carbon in the fossil fuel industry was US$12.7tn over 1995-2013, but may be as high as US$115.5tn. Originality/value Over the same period, the sum of industry profits, emission trading scheme carbon permit and carbon tax revenue totalled US$7tn, indicating the industry would not be viable if it was made to pay for damages to society.

scholarly journals Distributional effects of carbon taxation in passenger transport with lump-sum offset: low income households, retirees and families would benefit in Germany

2020 ◽  
Vol 12 (1) ◽  
Author(s):  
Christine Eisenmann ◽  
Felix Steck ◽  
Lars Hedemann ◽  
Barbara Lenz ◽  
Florian Koller
Keyword(s):  
Low Income ◽  
Carbon Tax ◽  
Transport Sector ◽  
Passenger Transport ◽  
Data Set ◽  
Distributional Effects ◽  
Lump Sum ◽  
Carbon Taxation ◽  
Taxation Scheme ◽  
Low Income Households

Abstract Background The introduction of a carbon tax on passenger transport is currently being discussed in Germany. Various stakeholders favour a consumption-based, revenue-neutral carbon tax with a uniform lump-sum offset for private households and a tax rate of 40 € per ton of CO2. Objective In this study, we examine the distributional effects of carbon taxation for the German passenger transport sector under the assumption of the proposed tax model. We discuss as to what extent which socioeconomic groups would be burdened and who might even benefit from carbon taxation. To answer these questions we use a uniquely modelled data set that encompasses all forms of passenger transport (i.e. in Germany and abroad) of the German resident population over 1 year. The national household travel survey Mobility in Germany 2017 is the basis of the microscopic data set. We derive annual CO2 emissions and carbon tax burdens for various population groups using the data on passenger transport, as well as specific emission factors. Results Results show that low income households, retirees, single parents and family households with two or more children would benefit from the proposed carbon taxation scheme due to below-average emissions per person; in contrast, working age households without children and car owners with heavy car use would be burdened. Our results are of particular relevance to transport researchers, transport politicians and decision makers as a basis for designing, developing and introducing a carbon taxation scheme.

The possible macroeconomic and sectoral impacts of carbon taxation on Turkey’s economy: A computable general equilibrium analyses

2018 ◽  
Vol 29 (5) ◽  
pp. 784-801
Author(s):  
Levent Aydın
Keyword(s):  
General Equilibrium ◽  
Carbon Emissions ◽  
Computable General Equilibrium ◽  
Carbon Tax ◽  
Model Simulation ◽  
Effective Means ◽  
Carbon Taxes ◽  
Rate Of Increase ◽  
Carbon Taxation ◽  
Per Capita

Although the idea of carbon tax was debated widely in the early 1970s, the first carbon taxes were imposed in some Northern European countries at the beginning of the 1990s. Since the Paris summit in 2015, there has been a growing interest in carbon tax that has begun to increase again. Although Turkey’s share of carbon emissions in terms of total global emissions is low, the rate of increase in emissions has increased in recent years and should be a cause for concern. Therefore, the aim of this paper is to analyze the possible effects of carbon taxes on Turkey’s economy by disaggregating the electricity sector a by using the computable general equilibrium model. Simulation results show that carbon taxation is a highly effective means to reduce carbon emissions. Despite all sectors being adversely affected, some low emission energy, textile, and other service sectors benefit from carbon pricing. The results also indicate macroeconomic costs of imposing a carbon tax at $7 per ton of carbon in terms of the decrease in GDP by 0.061% and associated with per capita utility of the representative household by 0.09% in scenario a. Imposition of successively higher carbon taxes in scenario b and scenario c results in 5.75, 12.02, and 16.95% reduction in carbon emissions at decreasing rate, respectively. However, these reductions are also accompanied by a decrease in real GDP and per capita utility from household expenditure, as macroeconomic costs, in scenarios a, b, and c at increasing rates.

scholarly journals POLICY INSIGHTS FROM THE EMF 32 STUDY ON U.S. CARBON TAX SCENARIOS

2018 ◽  
Vol 09 (01) ◽  
pp. 1840003 ◽  
Author(s):  
ALEXANDER R. BARRON ◽  
ALLEN A. FAWCETT ◽  
MARC A. C. HAFSTEAD ◽  
JAMES R. MCFARLAND ◽  
ADELE C. MORRIS
Keyword(s):  
Low Income ◽  
Policy Design ◽  
Carbon Tax ◽  
Carbon Price ◽  
The United States ◽  
Electricity Sector ◽  
Lump Sum ◽  
Near Term ◽  
Reduce Carbon Dioxide ◽  
Carbon Prices

The Stanford Energy Modeling Forum exercise 32 (EMF 32) used 11 different models to assess emissions, energy, and economic outcomes from a plausible range of economy-wide carbon price policies to reduce carbon dioxide (CO[Formula: see text] emissions in the United States. Here we discuss the most policy-relevant results of the study, mindful of the strengths and weaknesses of current models. Across all models, carbon prices lead to significant reductions in CO2 emissions and conventional pollutants, with the vast majority of the reductions occurring in the electricity sector. Importantly, emissions reductions do not significantly depend on the rebate or tax cut used to return revenues to the economy. Expected economic costs, as modeled by either GDP or welfare, are modest, but vary across models. These costs are offset by benefits from avoided climate damages and health benefits from reductions in conventional air pollution. Using revenues to reduce preexisting capital or labor taxes reduces costs in most models relative to lump-sum rebates, but the size of the cost reductions varies significantly. Devoting at least some revenue to household rebates can significantly reduce adverse impacts on low income households. Carbon prices at $25/ton or even lower levels cause significant shifts away from coal as an energy source with responses of other energy sources highly dependent upon technology cost assumptions. Beyond 2030, we conclude that model uncertainties are too large to make quantitative results useful for near-term policy design. We close by describing recommendations for policymakers on interacting with model results in the future.

scholarly journals Carbon tax acceptability with information provision and mixed revenue uses

2021 ◽  
Vol 12 (1) ◽  
Author(s):  
Sara Maestre-Andrés ◽  
Stefan Drews ◽  
Ivan Savin ◽  
Jeroen van den Bergh
Keyword(s):  
Prior Knowledge ◽  
Low Income ◽  
Carbon Tax ◽  
Information Provision ◽  
Survey Experiment ◽  
Perceived Fairness ◽  
Public Acceptability ◽  
Carbon Taxation ◽  
Funding Climate ◽  
Policy Perceptions

AbstractPublic acceptability of carbon taxation depends on its revenue use. Which single or mixed revenue use is most appropriate, and which perceptions of policy effectiveness and fairness explain this, remains unclear. It is, moreover, uncertain how people’s prior knowledge about carbon taxation affects policy acceptability. Here we conduct a survey experiment to test how distinct revenue uses, prior knowledge, and information provision about the functioning of carbon taxation affect policy perceptions and acceptability. We show that spending revenues on climate projects maximises acceptability as well as perceived fairness and effectiveness. A mix of different revenue uses is also popular, notably compensating low-income households and funding climate projects. In addition, we find that providing information about carbon taxation increases acceptability for unspecified revenue use and for people with more prior tax knowledge. Furthermore, policy acceptability is more strongly related to perceived fairness than to perceived effectiveness.

scholarly journals The Risk-Adjusted Carbon Price

2021 ◽  
Vol 111 (9) ◽  
pp. 2782-2810
Author(s):  
Ton S. Van den Bremer ◽  
Frederick Van der Ploeg
Keyword(s):  
Perturbation Theory ◽  
Climate Sensitivity ◽  
Social Cost ◽  
Carbon Price ◽  
Numerical Results ◽  
Social Cost Of Carbon ◽  
Economic Risk ◽  
Present Value ◽  
Analytical Results ◽  
The Social

The social cost of carbon is the expected present value of damages from emitting one ton of carbon today. We use perturbation theory to derive an approximate tractable expression for this cost adjusted for climatic and economic risk. We allow for different aversion to risk and intertemporal fluctuations, skewness and dynamics in the risk distributions of climate sensitivity and the damage ratio, and correlated shocks. We identify prudence, insurance, and exposure effects, reproduce earlier analytical results, and offer analytical insights into numerical results on the effects of economic and damage ratio uncertainty and convex damages on the optimal carbon price. (JEL E12, G22, H23, O44, Q35, Q51, Q54)

scholarly journals The Economic Effects of Equalizing the Effective Carbon Rate of Sectors: An Input-Output Analysis

2020 ◽  
pp. 197-215
Author(s):  
Makoto Sugino
Keyword(s):  
Carbon Tax ◽  
Emission Trading ◽  
Carbon Price ◽  
Economic Effects ◽  
Carbon Taxes ◽  
Output Analysis ◽  
Energy Taxes ◽  
The Difference ◽  
Carbon Prices ◽  
Energy Intensive Industries

Abstract The 2 °C target of the Paris Agreement has stimulated the implementation of carbon reducing policies such as carbon taxes and emission trading schemes, which explicitly applies a price on carbon emitting fuels. However, OECD (2016) reports that the effective carbon rate must be at least 30 Euros per ton of CO2. The effective carbon rate includes the implicit carbon price, e.g. energy taxes, along with the explicit carbon price. Previous studies have focused on the effects of explicit carbon prices. In this chapter, we will focus on the effective carbon rate and estimate the effects of carbon policies that increase the effective carbon rate to the 30 Euro threshold. We find that the short-term effect of a carbon tax that raises the effective carbon rate for all industries above 30 Euros will not only effect energy intensive industries, but also downstream industries that already have high effective carbon rates. Furthermore, we find that the carbon tax implemented in 2012 increase the average effective carbon rate, but increases the difference between taxed emitters and non-taxed emitters. Thus, tax exemption for energy intensive industries sacrifices economic efficiency.

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